In
2014, the Private Hospital Regulatory Board (PHRB) passed a new resolution (effective
January 2015) requiring all private hospitals to create its own sanitary landfill
for its health care wastes.
As a
response to this new regulation, RICH KIDS HOSPITAL (RKH) purchased a land P 20,000,000
to be used as a sanitary land fill. The hospital also incurred the following
expense in relation to the construction of the land fill:
RKH
estimated that the land fill can hold up to 175,000 cubic feet of compacted health care wastes. PHRB also requires that all landfill sites must be cleaned
up and restored after reaching its maximum capacity. RKH provided a reasonable
estimate of P 5,000,000 for the restoration costs. The actual compacted health care wastes for 2015 were 5,000 tons.
How should the company account for the foregoing costs / expenses?
Note: See the Next post for the complete solution and discussion.
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